Last year’s $13bn wildfire loss highlighted the catastrophic potential of a wildfire event which had managed to catch much of the insurance industry off guard. Some in the market questioned whether the modelling tools they had were capable of giving them the insight they needed to accurately assess the risks they were facing. Kevin Van Leer, senior product manager of RMS’ model product management team, explained how data from recent wildfires in Canada, Tennessee and California helped his team develop its first probabilistic wildfire model, which will be available to the market in the fourth quarter of this year. “Our brand new North America wildfire model covers the entirety of the contiguous United States and Canada. Part of the legislative report from commissioner Dave Jones’ office was a review of existing tools, which are the deterministic hazard scoring tools that don't account for mitigation measures, and do not include pricing within them,” he told Reactions. “Part of our solution with this new model provides a probabilistic view that includes pricing as well as an understanding of the impact of mitigation measures. It also gives insights into what locations are at risk and also accounts for vulnerability. It provides a brand new set of tools for the insurance industry.” “These new tools enable an understanding of adequate rates and deliver the capability with those adequate rates for carriers to potentially offer mitigation credits backed by modelling in the future as well,” he added. He stressed the fact that wildfires could occur throughout the US, including in New Jersey, Florida, and Tennessee, although the potential for a typical wildfire to reach the proportions of those that occurred in California last year are slim. According to Van Leer, many of the questions brought up by the CDI’s report were questions RMS’ teams had asked themselves while developing their model. “If you look at the existing hazard tools, what was missing from them was the view of a catastrophic wildfire of the order of magnitude of what we saw. Particularly looking at an area like Coffey Park, which was considered not at risk from wildfires.” That particular neighborhood was particularly badly hit by the blazes, which destroyed all 1,300 home within it. “Having the ability to understand accumulations and loss potential for clients was something that was missing from the market and that’s where we intend to fill the gap,” Van Leer said. “Particularly when it comes to the ember component of wildfires. We saw that a high enough severity of embers can be a cause of widespread ignition of structures particularly in urban areas far beyond the fire perimeter. That key component is part of the new solution that RMS is bringing to the market,” he added. A report from the CDI found that many wildfire models in use in California at the time did not provide granular data concerning wildfire risk, and did not take mitigation efforts into account. “Legislators, other public officials, and their constituents have expressed concern that wildfire-risk models are not accurate, do not provide satellite imagery that is granular enough to objectively identify fuel sources and other physical characteristics, and do not take into account mitigation done by the homeowner or the community,” reads the agency’s report. The CDI has the authority to regulate the use of models when it comes to setting rates, but not when it comes to whether or not a carrier will renew or issue a particular contract.